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06/15/2008

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Catfish

"David Brooks... argues that the founders of the nation "built a moral structure around money." ... emphasized hard work... etc"

where does slavery fit into this theory?

i would argue that the nation was founded on importing slaves from africa to work cash crop plantations, while old white people could sit around and act all dandy.

laziness isn't a new problem. we are just losing our ability to foist our externalities upon the rest of the world through violence and economic oppression.

catfish

apologies... that post wasn't really related to the article. i just get irate when people praise david brooks, and when they romanticize the origins of our country.

crf

You've neglected to mention the largest societal negatives of the lottery:

1) All the costs of people playing the lottery too often. (For example problem gamblers may become depressed, become less adept at socializing at work or at home, and at worst, engage in criminality or suicide.)
2) The direct costs of administering the lottery.
3) The cost of having large numbers of people working for lottery corporations, instead of productive work. Compare, for example, government funding for the arts: here, as in lotteries, governments are often paying a large portion of those workers salaries, but lottery workers produce absolutely nothing which society values, while artists produce art, which is highly valued.

Lowering those costs ought to be a priority for goverments, because they are a drain on the productivity of an economy, with very little benefits. Governments however, only seem to promote its expansion, looking only at the increase in their revenues, without contemplating fully the true financial and social costs. (Of course, it should not be eliminated: gambling is a natural, human passtime. If people gamble, why not have it benefit governments, rather than unscrupulous people?)

Jake

Posner's comments suggest that he (or his law clerks or other acolytes) needs to get out more.

Tucker

Unfortunately the idea that technology can replace savings and capital as a source of growth has been put to a rather more serious challenge than perhaps you realize, primarily by development economists who have a quite rigorous set of theories. First the savings still have to come from somewhere, and second there is growing work on the effectiveness of different kinds of savings. The Commission on Growth and Development recently completed its report which generally mirrors the consensus among economists and practitioners concerned with creating growth. It included the fact that foreign investment is a poor substitute for domestic savings. The creation of technology still requires capital that originates as savings.

In addition however I agree with you that the Brooks column is somewhat misguided, but I believe it misses a fundamental point. The impoverished are generally in debt and these are the people who are frequenting payday lenders and have too many credit cards with interest charging balances. That fact hasn't changed from 17th century men selling themselves into indentured servitude, and there are aspects to the early founding of this country showing that many early settlers were in fact in debt, but wanted to keep from being thrown in debtors prison or losing their freedom. Nonetheless the savings rate in this country was positive and significant for the period until the last 30 years and this is a problem. Clearly debt has moved up the income scale to the solidly middle class which is not because suburban families were tempted by payday lenders. It is because every time the economy needed a boost it turned to consistently responding American consumers who were deceived by a artificially inflated stores of value in home equity and overpriced dollars. And of course Greenspan always told us that neither could possibly be overpriced in such free markets.

And please if you want to tax consumption do it in a useful way- advocate instituting a federal VAT.

robert

I have not read Mr. Brooks' article but I'm not sure I would accept his premise.
The Puritan ethic was, at best, a necessary transitory state in the development of the national's commerical ethos. By the time of our nation's founding, the overwhelming desire to see everything through the prism of religion was replaced with individuals (many of whom were Deists and viewed God as merely a vestigial presence)
substituting religion with reason.
With the coming of the subsequent industrial age capitalism, and its attandant wealth, attained unprecedented heights. The result was guilt-free consumption in the present rather than using savings to "buy" one's way in to the next world.
A nation whose culture was consistent with the Puritan ethic never would have become what we were in the 19th century and what--for better or for worse--we are today.

Jimbino

Playing the lottery is stupid? What's stupid is forced participation in Social Security. The life expectancy of a black American male is 66, meaning that the government expects him to die the year he qualifies for Social Security benefits.

I've calculated that if the government had forced him instead to put his SS premium each month on a single spin of a roulette wheel and invest whatever winnings in the S&P, when he died at 66, the man would have over $2,000,000 to leave to his heirs. The way it is now, the fruits of his lifelong premiums are probably dedicated to subsidizing the SS benefits of some white woman who never worked a day in her life.

Thomason

Brooks' article was a fine addition to Fathers Day. Each generations of fathers have been telling the next generation how they aren't as industrious and thrifty as need be.
The fact is that today we can do and get things more easily than in the past. In the early 20th century, you needed to work harder or you'd starve. It wasn't some philosophy or religion of industriousness, it was being hungry and cold that motivated one to work hard. Now, food is plentiful and most buildings are climate controlled. Add to that the present and growing expanse of service industries, those that do for you what you don't feel like doing. In the past, most every job (excepting menial or manual labor) had to be done by the one needing it done. Today, you can outsource, subcontract, temp, etc., most every task. The goals of production, and of self-accomplishment, are being replaced by the goal of maximum delegation to others.
My more cynical viewpoint is, that with all these comments about industrious Puritans, reforming Protestants, and the opulence of Catholics - whether allowing mixed marriages was the first step down the slippery slope.

kabin

Today, you can outsource, subcontract, temp, etc., most every task. The goals of production, and of self-accomplishment, are being replaced by the goal of maximum delegation to others.

Paul G

A bagatelle, perhaps, but I have noticed a proliferation of sentences like this: "David Brooks is one of the most thoughtful newspaper columnists." It seems to me, the normal use of words like "most", "funniest", "best", is to signify the one thing at the pinnacle. If I am right, it is incorrect to say "one of the most thoughtful", since there can only be one most thoughtful. Additionally, since I recognized and tried to fix my overuse of phrases of the kind, I have noticed myself dialing down hyperbole, which I often overuse.

neilehat

Paul, As for grammar issues, perhaps Mark Twain put it best, "Kill the adjectives".

Now, on to the meat of the subject. All of this seems to prove Aristotle correct when he said, "Ethics is the practical end of philosophy". Where else can one study the details and relationships between; Good and Evil, Right and Wrong, Virtue and Vice? Important issues across time and space; making Man the measure of all things. One important question that needs to be answered is, "Why did God in his inifinte wisdom create seven vices and only four virtues and make those vices so much more pleasurable than the virtues?" When in the end all he really wants is for the Good to prevail. So much for Calvin.

As a kid in church on Sunday, I always wondered why if it was that the Lords Prayer, that some had trespasses and others had debts. One day it occured to me, Ah-ha! that's because some are landholders and others business people with commercial interests. The awakening of the understanding of economic factors through Religion in the child's mind. My, this religion stuff can be important! The question now becomes, "How is it to be directed to socially beneficial uses by religion and morally acceptable goals?" Calvin had one approach, but there are many others.

Concurrent with this theme, is the issue of socially acceptable ethics and codes of morality outside of the Judeo-Christian experience. Some going back as far as 600 BC and earlier. Any one remember Aseop and the fable of "The Grasshopper and the Ant? A simple story of frugality and hardwork guaranteeing survival. What happened to the Grasshopper who played and fiddled all the summer while the Ant industriously worked all the summer day? The Grasshopper died when winter struck and he had no means of support, but the Ant sat snug in his home that was well provided.

Perhaps a parable for our own times?

Jack

Jimbino! Whew! that was quite an outburst of seemingly unsupportable pap! Let's take a look:

"Consider life expectancy. In 1992, the life expectancy of a person born in the U.S. was 76 years. It was 74 for Black women, 65 for Black men, 80 for white women, and 73 for white men. Thus, white people will live, on the average, 7 years longer than Black people. Startlingly, in 1990 two researchers found that the life expectancy for a Black man in Harlem was lower than for a man in Bangladesh."

......... Now it IS a shame that in this "richest of nations" the poor of "Harlem" or even rural pockets? blankets? of poverty share a much lower life span regardless of skin color. The above is 15 year old data so it's perhaps on the low side but it looks as though average lifespan for "blacks" is nearly 70. And relevant to your claim that SS is a bad deal for them it would be good to look into how many of those dying prematurely and dragging down the averages were on SS disability for a number of years. Also, it would be excellent if you provided the amount paid in by lower income folk as the "deal" is quite a bit better for those of lower incomes than for those of upper incomes.

BTW I've taken a few playful spins of the roulette wheel; you know nothing of investment grade of course, but have nothing to show for my spins except a "free" drink or so. Could you tell us how you managed to get such a positive return out of a negative sum game? I've always been under the impression that a game returning even 95% of the "investment" per spin would eat away at one's capital pretty rapidly over a week or so. Have I been wrong all this time?

Oh.......... could you clear something else up for me? It seems there has been a recent "fad?" of "borrowing" some several billion from the SS fund that had been designated to help us through the boomer retirement period. I guess the rate of return to the SS fund IS very low, perhaps even zero? But were we not lending ourselves money cheap, wouldn't we have to borrow it at higher rates from those actually willing to lend at market rates? Thanks! Jack

Jack

CRF Good points. I've no moral objections to lotteries and other forms of gambling but we do need to keep in mind that it's "entertainment" and a parasite on our true economy. I put quotes on "entertainment" as I think gambling a bit suspect even there. Somehow there seems a difference between paying to gamble and paying to ensure that talented singers, actors and sports figures can ply their entertaining crafts.

I guess that in the state of our current economy those you mention working in the field would otherwise be unemployed and perhaps they should be included in a figure of un- or under-employment.

I too think lotteries and the like are a poor means of a governing body raising money for schools etc. As Posner sort of points out (and travel to poor nations confirms) it's those who've little hope of improving their standard of living who are most prone to take a chance on games of poor odds.

Jim

What is it that I am missing here? Haven't prices risen inexorably since Keynesianism was adopted after WWII? Isn't Keynesianism inexorably inflationary? Aren't the government and the private sector equally responsible for continuing to deficit spend (borrow, credit, whatever you wish to call it)? The politicians are constantly pandering to "You deserve everything". The commercial sector is constantly doing the same, "You deserve not to have pimples". Is it possible that early Americans were relying on phiosophical and religious proscriptions against extravagance based on historical experience? And now we have a government which doesn't have the political will do stabilize the cost-price-value curve and a population which is totally materialistic. Now we have influential thinkers saying that is just fine. Great! Personally, I lean toward Ravi Batra's view in his "Great American Deception" and that of Marvin Harris in "Why nothing works".

By the by, I wonder what the asset ratio is between 60 to 80 year olds to 40 to 60 year olds now compared to some previous years, say 1920 and 1960 and how much asset transfer is going on before death between those age groups.

Best regards to all.

H

Oh, David Brooks. How silly you are. I guess it's too much to ask for a thorough review in an article, and blaming the decline in morality and/or intelligence is always a favorite topic of older crowd. [You're a moron. Just ask anyone older than you.]
The real answer for the decline is probably far more complex. Perhaps the rise of cheap money over the last half-century has made saving less attractive [fractional reserve banking and monetary policy in general] while the last century has also seen a huge rise in per-capita income. [I distrust the median income number in the US because the influx of immigrants keeps adding people on the lower side of the median, and yet the median holds steady or rises.] In such an environment, it makes perfect sense to borrow early, and then work. If your income rises faster than the interest rate, which was likely, you'd simply get your stuff faster and still save money over, say, renting until you have saved enough to buy a house.
As for the need for the Puritan work ethic or protestant ethos, I highly doubt it's necessary to a successful commercial society, though I also doubt it's damaging. If it were necessary, the Chinese would be doomed, as would Japan, India, Dubai, the very successful Baltic states, or all of Southeast Asia. The necessary ethos is a government that respects property rights and the rule of law. The rest tends to take care of itself, subject to luck and circumstance.

Nessie

"The Puritan legacy inhibited luxury and self-indulgence. Benjamin Franklin spread a practical gospel that emphasized hard work, temperance and frugality"

Just wondering where ol' Ben's illegitimate child figured in this Protestant ethic of temperance. Did I say "child"? Oops! I meant "children."

neilehat

Nessie, At least Franklin could and did support his "spawn". Unlike the ones today who leave it up to the State or forces of Nature to provide. Another black mark for modern civilization?

Jim

Just one or two other comments:

Judge Posner, what is the difference between moral values which undergird commercialism and other moral values? It has always been my impression that morality was based on adhering to natural law, an adherence of questionable strength in our society.

It would be interesting, if not already done, for economists to study the optimum point of balance between credit (all forms of public and private borrowing), prices, capital creation, and employment as well as what elements and how many of them will cause disequillibrium between those elements. I suspect that the answer is "Not many". Just as in any social organism, a small number of deviants can throw the entire enterprise out of kilter and even if it doesn't kill it, the organisim (organization) will spend enormous energy trying to recover and maintain some normality.

jimbino

Jack,

The American Black male has a life expectancy of about 70 years in 2008: http://www.foxnews.com/story/0,2933,293008,00.html

The expected return on a $1 bet in roulette is about 95 cents: http://en.wikipedia.org/wiki/Roulette

The average wage of an American Black is about $2500 per month:
http://www.washingtonpost.com/wp-srv/business/daily/graphics/raceWages_101804.html

FICA tax takes about 15.3% of his monthly earnings, or about $380. Thus a Black male forced to invest the proceeds from a single spin of a roulette wheel every month would be investing, on average, about $360 per month in something like the S&P 500, which has grown historically at a rate of 7% or so.

Let’s assume the Black American male starts work at 18 and works until retirement at age 67, when he would have been entitled to draw SS benefits for the remaining 3 years of his life at about $1500 per month. Under my roulette scheme, when he retires at age 67, he will have worked 49 years and his S&P account will have accumulated $1,699,074, giving him a monthly income, from the dividends, of some $9551 per month, and, when he dies at age 70, his heirs will get the $1,699,074.

Of course, under different assumptions, the results will vary, but anyone can see that Social Security is a very bad deal for the Black American. Furthermore, paying the premium every month is a lot less fun than a spin of the roulette wheel.

Brian Davis

At the risk of moral delict I'll wager that Judge Posner is able to get out about whenever he wishes. He can draft court opinions off the top of his head. But whether he's ever had a law clerk who could keep up with him is a different question.

Payday Loans

Payday Loans are good when you are in a bind and need to catch up on your bills, they are quick, easy, and confidental.

H

Payday loans also cause bankruptcy, so shut it:

http://www.creditslips.org/creditslips/2008/03/do-payday-loa-1.html

Brian Davis

Not to over-Biblicize this, but Judaism, Christianity, and Islam can't all be wrong: usury is radioactive. RUN, don't walk, from the smile with fists full of easy-credit $$$. It's your only shot at economic liberty in later life. Our society doesn't need to enslave with the whip any more. We've got paper, plastic, and the UCC, all perfectly legal.

Saint Darwin Assissi's cat

Usury (in the original sense of any interest) was at times denounced by a number of religious leaders and philosophers in the ancient world, including Plato, Aristotle, Cato, Cicero, Seneca, Plutarch, Aquinas, Muhammad, Moses, Philo and Gautama Buddha.
The above comment was taken from Wikipedia. Once again Judge Posner has thrilled me! First, he referenced Max Weber, father of Public Administration, which I am studying, so I was excited to see Weber's name in a Posner post. Secondly, I learned about NYT columnist David Brooks whom I had never read before...in his book "On Paradise Drive How We Live Now and Always" (2004) I learned about Jewish Buddhist Taoists -- I believe I met one working on the Hillary Clinton Campaign so illumination into this concept was of interest. Third, I had not thought about usury since law school and the Wikipedia article is interesting. Posner and Becker like to do the math thing with lottery behavior...doing the math thing with poor people looking for a shot out of destitution and fear doesn't really work too well. Gambling is not a productive behavior from any perspective whether it is a state lottery, a craps table in Vegas, or some might say, playing the stock market. I like the Ben Franklin concepts of hard work, temperance and savings. Today, many are into this type of thinking and behavior ... they have names like Eckert Tolle and Jack Kornfield and even Mary Ann Williamson. Limited gambling is a form of entertainment for some. Taking $20 to buy 20 lottery tickets replaces the movie and popcorn but doesn't give the purchaser three hours of entertainment; maybe only one hour. Also, no new knowledge, or personal insight, or giggles, or the opportunity to talk to someone else who has seen the movie thus forging a new friendship are forgone with the purchase of lottery tickets. For some there will be a hangover from the behavior: buyer's remorse or winner's mania. There is a segment of our population who have serious gambling problems ... Someone wrote about a clerk being able to keep up with Judge Posner. For Judge Posner a day without reading and writing would probably be a miserable hell. He is a fortunate man in that he has found his bliss. I would guess that he would prefer reading and writing over just about any other activity .... he would find sitting at a slot machine all day dreadful. The pay day lenders are doing business with people who are living on the edge ... maybe they are addicts (alcohol, nicotene, drugs), maybe no one ever sat down and taught them how to shop (walk that extra block to the 99 cent store for 99 cent green beans instead of buying $2 green beans at the more posh Albertsons). Maybe they are depressed like the author of the Harry Potter books (although her gamble was in the writing and submission of a book which paid off royaly). I guess we all gamble every day in some way...the payday lenders and credit card companys may just be the biggest predators.

Jack

Jimbino..... "Of course, under different assumptions, the results will vary,"

Indeed they will.

First while we retired him in today's dollars 49 years ago his wages would most likely have been barely above the min wage; less than $200/month and perhaps his employment history would have been........ less than steady.

Two or four years in the military? Well, I think we did contribute to SS but if I remember accurately the percentage was lower in those days, and regardless of the program 12% of $100/ month didn't amount to much.

Still it would be true that whatever he was able to invest in either program would have grown faster at 7% than in the SS program; though adjusting for the ravages of inflation the true return would be more like a post-inflation 3%.

But! he'd not have anything to invest as he'd have been using what little he had to help his aging parents who'd not have SS under your scheme. The point being that there is no corpus to invest and from which to expect an investment return.

Also, there is a disability function of SS and some underage kids receive money before they've joined the workforce while others receive it when they can no longer do their jobs.

Lastly, in the years since Moynihan and a few others joined together in a non-partisan spirit to adjust SS to create a temporary surplus enabling the boomers to retire w/o breaking the bank, I too would rather those several trillion were invested in a productive manner as is our Alaska Permanent Fund, but! alas we've been on an irresponsible spendathon that has made us a nation of debtors rather than savers and are (very quietly) lending our SS surplus to the operating budget of our nation at a very low rate of return. I suppose we could lend it out at market rates, but then would have to turn around and borrow the couple trillion at market rates as well.

Geez! just think of all the things we "could" do were we not paying interest on the $10-$12 trillion of debt!

"Have We Lost the Moral Values That Undergird a Commercial Society?"

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